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December 08, 2015 | money-management

How to Calculate Home Equity


If you’re contemplating a home equity loan, whether for home improvements, debt consolidation, or financing another big purchase or expense, you may want to determine how much available home equity you have before you apply.

First, here are some basics about Home Equity Loans in the state of Texas:

  • The state of Texas allows homeowners to borrow a maximum of 80% of their home’s value, minus any first or second lien balances.
  • Your home equity loan can be your first or second lien. If you already have a second lien, you will need to consolidate your new home equity loan with your current second lien.
  • To obtain an idea of your home’s value, you can review your tax appraised value. You can search for those in the following county appraisal districts.

    Travis County
    Williamson County
    Hays County
    Bastrop County
    Caldwell County

How to Calculate Your Home Equity

Calculating your home equity requires a little bit of math, but nothing your basic calculator can’t handle. Here are two examples to help you calculate your home equity, whether you have a single lien or multiple.

Let’s say your house has an appraised value of $200,000 and you have a balance of $75,000 on your mortgage:

  • Step 1: $200,000 x 0.8 = $160,000 (the 80 percent limit allowed by Texas state law)
  • Step 2: $160,000 - $75,000 = $85,000 (mortgage balance subtracted)

That gives you $85,000 worth of borrowing power in your home!
If you have more than one lien on your home, you’ll need to add the balances together to come up with your total mortgage balance. Keep in mind that your 2nd lien balance would be combined with your home equity loan.

Assuming that same $200,000 value and $75,000 balance as before, let’s also assume you have a second lien of $20,000:

  • Step 1: $200,000 x 0.8 = $160,000 (the 80 percent limit allowed by Texas state law)
  • Step 2: $160,000 - $75,000 - $20,000 = $65,000 (mortgage balances subtracted)

That gives you $65,000 worth of borrowing power in your home!

It’s important to remember that having available home equity doesn’t mean you automatically qualify for a home equity loan! Your lender will need to review your loan application and credit history1.

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1. Loans Subject to approval. Combined Loan-to-Value (CLTV) cannot exceed 80% of your home’s value. Additional terms, conditions, and restrictions may apply. Amplify Membership and Property Insurance required.